Key Contacts

Aarti Jagpal comments on how the EAT decision on voluntary overtime and holiday pay could impact UK businesses

02 Aug 2017

In the EAT case of Dudley Metropolitan Borough Council v Willetts it was held that employees who work voluntary overtime beyond their contractual hours (either on a regular or recurring basis) may be entitled to have these overtime payments included within their holiday pay. This would apply to the first four weeks’ of holiday entitlement.

Whilst this decision is likely to have significant impact on UK businesses, it is unlikely that it will result in employers receiving claims for historic backdated voluntary overtime, since employees who have had a break of more than three months since the last ‘deduction’ would be precluded from bringing a claim for unlawful deduction of wages. In any event, claims for unlawful deduction of wages are capped at two years. Further, the decision only applies to the 20 days leave under the Working Time Directive, and not any additional contractual holiday that the employee may be entitled to.

However the EAT offered little by way of further guidance on what level of regularity or frequency is required in order for a payment to qualify as “normal remuneration”. The EAT said that how this applies will vary on a case by case basis, and it is therefore for employment tribunals to consider the facts and decide whether voluntary overtime payments are sufficiently regular or recurring to be included within the calculation for holiday pay.